03/28/2023

NLRB General Counsel Illuminates Prior Decision Addressing Severance Agreements

Recently, the General Counsel for the National Labor Relations Board (“NLRB”), Jennifer Abruzzo, issued a memorandum responding to inquiries that became prevalent after the McLaren Macomb decision. In McLaren Macomb, the NLRB took aim at overbroad non-disparagement and confidentiality provisions in severance agreements. The NLRB also found that simply offering a severance agreement to an employee can violate the National Labor Relations Act (“NLRA” or the “Act”) if the agreement provides severance benefits in exchange for giving up statutory rights under Section 7 of the Act - NLRB Takes Aim At Severance Agreements.

Explaining the prior decision, Abruzzo noted that overbroad provisions have a negative impact on protected rights and deter employees from accessing the NLRB, a union, judicial or administrative or legislative forums, the media, or other third parties outside the employee-employer relationship. When an unlawful agreement is presented, an employer is in violation even if the employee does not sign the agreement or otherwise consents to the overbroad terms. Some provisions that are specifically addressed by Abruzzo include confidentiality and non-disparagement clauses and disclaimers.

Confidentiality. Confidentiality clauses that are narrowly tailored to restrict the dissemination of proprietary or trade secret information for a period of time based on a legitimate business justification may be considered lawful. Confidentiality provisions that preclude employees from assisting others to address workplace issues and/or prevent communications with the agency, a union, legal forums, the media or other third parties are unlawful.

Non-Disparagement. A narrowly tailored, justified non-disparagement provision that is limited to employee statements about the employer that are malicious and untrue (i.e., statements made with knowledge of their falsity or with reckless disregard for their truth or falsity) may be found lawful.

Disclaimer. While a specific savings clause or disclaimer language may be useful to resolve ambiguity over vague terms, they would not necessarily cure overly broad provisions. Employers may be liable for mixed or inconsistent messages that could impede on Section 7 rights. A valid disclaimer should specifically set out the employee’s statutory rights and explain that no rule should restrict those rights.

Moreover, Abruzzo mentions other provisions that may interfere with Section 7 rights including non-compete and non-solicitation restrictions, no poaching clauses, broad liability releases, and covenants not to sue. Abruzzo confirmed that an overbroad and/or unlawful provision will be voided instead of nullifying the entire agreement, regardless of whether there is a severability clause in the document.

The McLaren Macomb decision applies retroactively to agreements entered into prior to the decision. Maintaining and/or enforcing an unlawful provision in a former severance agreement continues to be a violation of the Act. Employers should consider contacting employees subject to overly broad provisions and advise them that the provisions are null and void and that they will not seek to enforce or pursue any penalties, monetary or otherwise, for breaches of those unlawful provisions.

Employers should reach out to any McGrath North labor and employment attorney to advise on how to proceed regarding prior severance agreements and revise current separation agreements going forward.